Contracting is often the staple work of in-house legal teams. And it is easy to see why when one considers the role contracts play in an organisation’s business. From protecting confidentiality, to making critical purchases, to appointing key personnel, contracts regulate every part of what organisations do and affect many parts of a business. Streamlining the contract management process and making it more efficient can therefore yield tremendous benefits.
Seen in isolation, entering into a simple contract such as an NDA may not be that complicated to manage. You fill in some fields in a template and then send it for signing. But what happens if NDAs in certain jurisdictions require an approval process? What happens if you need to track when commercially sensitive NDAs expire? What if legislation changes, and someone starts using an old template with outdated language? Finally, what happens if someone simply forgets to file an important NDA and it becomes lost? Even the humble NDA can become complicated and slow down the speed of business. This complexity can grow exponentially with more complex agreements which have more moving parts.
Contract workflow automation allows teams to automate many of the steps in the contract workflow that makes the entire process more efficient and frees up time for the in-house legal team and other team members to focus on more pressing matters.
So, what is contract workflow automation and how does it work? More importantly, what benefits does it have? Here, we will look at these questions in more detail.
What Is Contract Workflow Automation?
Automation is vital to success as increasing numbers of organisations are moving towards digitising all their business processes. They have been digitising everything from marketing processes to production, and contract management has not been left behind.
Contract workflow automation is an integral feature any contract management system should have. A dashboard allows the management of contracts and all other contract-related issues from one central hub. It focuses on streamlining the specific stages in the contract management lifecycle and this is where some of its main benefits can be found. Let us look at these specific stages.
The contract request is the first step that puts the contract management process into motion. By automating this step with a self-service tool, business groups within the organisation can request contracts with the terms they need. After receiving a contract request, the in-house legal team can then respond to that request according to the priorities of the business.
This means there are no more unnecessary emails and phone calls for any business group to get the contract they want, when they need it. This starts the process off as efficiently as possible and reduces the time it takes to produce a first draft of the contract.
After the request has been received, the contract is typically assembled from a precedent or standard form document. Legal teams can automate this stage too with a central repository of templates and document automation tools.
This means that the modern-day legal team can prepare and approve new contracts in a streamlined manner, without the need for extensive bespoke drafting. By standardising all the content and language across contracts in this way, the organisation ultimately has a more efficient and consistent contracting process.
Contract workflow automation makes the contract negotiation process a lot easier. During the negotiation process all changes are automatically tracked through a centralised system. Having this information visible to everyone on the team ensures accuracy and keeps consistency in the negotiations. This reduces the possibility of negotiations being trapped in emails, with possibly incorrect versions being sent back and forth.
With traditional approval workflows the contract is sent to every team member that must approve the contract. Here, teams usually rely on manually maintained checklists and emails to get the contract to the right people for their approval. This presents several problems.
With spreadsheets and email, teams struggle to keep track of approvals, especially when there is an approval hierarchy. This setup can also lead to missing or incomplete information, and the audit trail is difficult to follow, or perhaps even non-existent. Also, getting the right people to approve the contract at the right time can be a slow process. At worst, it might lead to lost deals or lost contracts.
Contract workflow automation provides a solution to these problems. It facilitates a streamlined process to remove impediments to deals, while also having the flexibility to support complex internal processes. Teams can set rules for approvals which can be based on contract type, the people involved, counterparties, or any other requirement for the contract. This facilitates a timely and orderly workflow that routes the contract to the right team member at the right time.
This reduces the time from contract creation to signature, saving time, money, and making the entire contract lifecycle more efficient.
Signing is what binds parties to the agreement. The proliferation of e-signatures has allowed organisations to replace the slow and expensive process of physical signing. However, certain types of documents still require a physical signature. Therefore, a contract workflow solution should support both physical and electronic signatures. Furthermore, a contract workflow solution should enhance the e-signature experience by allowing companies to automatically report on outstanding contracts, including key information such as counterparty details and time elapsed since the contract was sent for signing.
Renewal and Amendment
Once a contract is in operation, it may need to be amended. Team members can request these changes, clause templates can be inserted from the template repository, and the contract can be reviewed and approved by the necessary team members using the same process that originally created the contract.
If a contract is not evergreen, it will need to be renewed or amended. The benefit of an automated solution is that it can send notifications of pending renewals, and support auto-renewals and contract terminations. Although these are an excellent opportunity for many organisations to generate more revenue, they are often missed because they rely on manually managing and diarising key dates, which is prone to human error.
It is important for record-keeping purposes that all contracts be kept for the life of the contract, and often for some time afterwards. The traditional method of storing contracts in filing cabinets (even digital ones) can become cumbersome, especially if an organisation deals with many contracts. Shared folders represent an improvement, but it can still often be difficult to locate the correct contract quickly at the needed time.
Contract workflow automation allows a team to automatically track data from contract assembly all the way through to a centralised repository. This means that details such as counterparty, start date and end date are only ever entered once to populate the contract, file it, and everything in between. This reduces time because no double data entry is required, and it also removes errors and duplication. An organised repository makes it easy to search for business terms, contract clauses, performance status, or free text. Not only does this provide the obvious benefit of ease of access, but also makes it easier when it comes to audit and reporting.
Audit Trails and Analytics
Audit trails are a vital part of contract accountability. As the system records every step by every user during the contract lifecycle, an administrator can view the logs to see who has done what on any specific contract. This information cannot change, and it cannot be edited. This greatly reduces risk if things don’t go as expected. At the same time, the system can provide analytics to help keep teams updated on all aspects of a contract. The data can also suggest areas for potential improvement.
To enjoy all these benefits doesn’t need to be hard. One of the best parts of contract workflow automation systems is that they’re easy to implement and they don’t need specific technical knowledge to build and manage. In other words, there’s no waiting time for an IT team to build the workflow.
The administrator is able to quickly build an automated workflow for basically any contract, in line with requirements. Also, as many workflows as the organisation requires can be built with as many rules or requirements, as necessary. This means the workflow is completely configurable to suit the needs of both the organisation and its users.
This also promotes compliance in the contract lifecycle process which, due to number of team members working on a contract or the number of steps in the process, can be troublesome. Say, for instance, an organisation requires that contracts below a certain contract amount can be approved by lower management, with contracts above that amount needing approval from upper management and the finance department. The system can then be set up to trigger separate workflows based on the size of the contract.
Should the contract price be below the threshold amount, the workflow will guide the contract through the lifecycle up to lower management where the approval will be. Likewise, should the contract price be above the threshold amount, the workflow will place the contract before upper management and the finance department for approval. Along the way, in both workflows, all the relevant individuals will be notified of their tasks and what needs to be done.
When an organisation wants to speed up its contracting process, incorporating a contract workflow solution provides great value. Not only does it make the process faster, it reduces risk and improves compliance.
Did we miss any benefits? We’re love to hear if there are other ways that contract workflow automation can help organisations.